AtheroGenics zooms on $1 billion pact with AstraZeneca; Regeneron rises 6%; BioCryst bounces 16%

By Ronda Fears

Nashville, Dec. 22 - As the New York City transit workers' strike ended in its third day it was none too soon, traders in biotech stocks said, as in just three days the clogged highways were taking a toll on the financial markets, so to speak.

Secondary action was light, but decidedly upbeat, while collaborations took center stage in the way of financing-related activity.

Regeneron Pharmaceuticals, Inc. rocketed upward after the company said it has expanded its collaboration with sanofi-aventis on a cancer project known as the vascular endothelial growth factor trap to include Japan. Regeneron will get an upfront payment of $25 million, plus milestone payments for products approved in Japan.

Shares of Regeneron climbed throughout the session, ending the day higher by 76 cents, or 6.28%, at $12.86. Regeneron's 5.5% convertible due 2008 dropped 4 points on Wednesday to 90, a convertible trader said, but saw no action Thursday although he said there were some strong "lookers" at the paper after the news.

"Regeneron should remain a buyout candidate in light of Big Pharma's looking for new science to build their futures on," a sellside market source said. "I look for further inclines in the share price. Regeneron is not for everyone - there is risk - but the reward potential is huge."

AtheroGenics ascends 20%

Due to the massive size of the deal for AtheroGenics, Inc., that stock soared higher by close to 20%, aided by short covering, traders said.

"Short covering kicked in big time on the news," said a biotech equity trader. "It was big."

AtheroGenics inked a deal with drug giant AstraZeneca to license its heart medication AGI-1067, for the condition artherosclerosis, in which the Atlanta-based biotech will pocket an upfront fee of $50 million plus up to $1 billion if it meets performance milestones.

"The royalty rate is excellent," the trader said. "AtheroGenics can earn up to 30% with realistic revenue level expectations. This is key, because now they probably will have no further need to do any financing. This stock should now begin ascending."

Indeed, that was the case. AtheroGenics shares zoomed, adding $3.24 on the day, or 19.64%, to close out Thursday at $19.74.

AtheroGenics' convertibles were quietly, but remarkably, higher on Thursday as well. One convertible market source said the 1.5% bond due 2012 had just a couple of trades but gained 8.25 points, on an outright basis, to 92.5 bid, 93 offered.

Flu names a focal point

Influenza names were in focus again Thursday, with BioCryst Pharmaceuticals, Inc. topping the list as it got Food and Drug Administration approval to being human testing with its avian flu vaccine.

Novavax, Inc. and China-based Sinovac Biotech Ltd. were active, too, following news on those stories the previous day.

With somewhat light volume, Novavax shares dropped Thursday by 15 cents, or 3.64%, to $3.97. The stock had fallen sharply Wednesday in after-hours activity on news that the Malvern, Pa.-based biotech, which is working on an avian influenza vaccine, had filed a $100 million shelf to issue stock and warrants, earmarking any proceeds raised for clinical work on avian and other flu vaccines.

China-based Sinovac rose another 3% on Thursday, gaining 13 cents on the day to $4.57 after an 8% increase in the shares on Wednesday on the announcement that it had begun human clinical trials in Beijing for its avian flu vaccine Panflu.

BioCryst bounces on flu OK

BioCryst, however, was the big mover among flu names, announcing Thursday that the FDA has given verbal approval to begin human testing of intravenous peramivir for testing in avian flu, sending its shares soaring by nearly 16%.

There was plenty of selling interest with folks taking profits, but short covering accounted for a large portion of the stock's rise, traders said.

Analysts said the market is realizing that Tamiflu - marketed by Roche Holdings AG and developed by Gilead Sciences, Inc. - will not be the only drug for avian flu.

BioCryst shares rose $2.38 on the day, or 15.65%, to $17.59.

Birmingham, Ala.-based BioCryst said the approval allows it to develop injectable formulations of peramivir, its influenza neuraminidase inhibitor. Early stage studies are expected to begin in first quarter. Separately, the company also said it started early clinical trials of its lead anti-cancer compound Fodosine to determine the safety of repeat doses of an intravenous formulation of the drug in certain patient populations.

Cephalon issues up sharply

Cephalon Inc. shares and its convertible debt rose nicely on news that it had settled a patent dispute with Ranbaxy Laboratories Ltd. over a generic version of Cephalon's sleep disorder drug Provigil.

Financial terms were not disclosed, but under the agreement Frazier, Pa.-based Cephalon will grant the India-based Ranbaxy a non-exclusive royalty-bearing license to make a generic form of Provigil in October 2011, or April 2012 in the United States.

The latter date will apply if Cephalon gets an extended exclusivity to study the drug for use with children. Also, an earlier entry by Ranbaxy may occur if another generic version of Provigil hits the market. Cephalon said the Ranbaxy settlement, though, will have no bearing on several other patent lawsuits it has initiated against other generic companies hoping to peddle a Provigil clone.

Cephalon shares gained $4.76, or 8.51%, to $60.67 and its three convertibles closely followed.

Cephalon's 0% tranche A convertibles were seen higher by 1 point on the day at 107.5 bid, 108 offered with the stock at $59.50, and the 0% tranche B gained about 0.875 point to 110.5 bid, 111 offered. Cephalon's 2% convertibles were at 137.125 bid, 137.5 offered.

The move in the debt was considered "pretty big" given the generally quiet character of the second-to-last trading session before Christmas, according to a New York-based buyside trader.

"It was one of the big movers of the day," he said.

Rebecca Melvin contributed to this report.

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